How Long Should Your Mortgage Be?

A lot of times people who are perfect candidates when they’re buying a home for a 15 year mortgage still take out a 30 because people that are really careful with their money are always doing what ifs. Well what if this happens at my job or whatever and suddenly I have this much larger monthly payment I have to make on a 15-year loan than a 30, what would I do? What would I do? Well the thing is I find that a lot of people that are perfect candidates for a 15-year loan already are doing so many other things, they’re great savers, they’re building money for their retirement, they have money put aside for emergencies and all the rest and you compound the benefit to yourself if you’ll do a 15-year mortgage instead of a 30. I mean first of all you’re out of debt in half the time. Second, you pay so much less interest over the years, and third, the interest rates on a 15-year loan versus a 30, depending on current market conditions, tend to be a half an interest point lower to as much as a full interest point lower than a 30.

So it helps you build up equity in your home so much quicker you’re keeping money in your pocket instead of paying it to the bank and I know, I know that you’re thinking well what if, what if, what if. Let’s think of the positives as well. If you’ve done those other checkmarks you are somebody who lives on a lot less than what you make, then take this one additional leap and look at the 15-year loan instead of the 30. The discipline is great, the benefits to your life long-term are extraordinary and especially if you are 45 or older I absolutely want you when you’re buying a home looking at a 15-year loan instead of a 30. Because once you hit retirement, it’s so much better if you can be mortgage debt-free that you don’t have to worry about a house payment each and every month and it allows you to live on less in retirement. So I know that it might mean you have to buy a little bit smaller home to be able to do that if you’re in your mid-40s or later but the benefit to your wallet and your financial security — extraordinary!

Your Bank Doesn’t Want You To Know This

Banks are now starting to register collateral charge mortgages and they’re telling you that they’re good for you. They’re saying listen, we’ll register the mortgage for more than you’re getting and more than you need but it’ll be easier for you in the future to get it if you need it and that’s a fib because it’s not easier, you got to qualify in the future for every dollar that you need but more importantly they know that it makes it more expensive for you to transfer to another institution say if you want to get a better rate somewhere else and a lot of times you don’t even know it’s collateral charge mortgage because nobody explains it to you. So next time you’re getting a mortgage ask them is this a collateral charge mortgage? I don’t want it. I want a regular mortgage. Make it a great day and pass it on.